Cal Am has new plan for desal

California American Water will challenge the county's public desalination plant ownership ordinance as part of its new Monterey Peninsula Water Supply Project.

The company will argue that the state Public Utilities Commission's general counsel has indicated the commission has exclusive jurisdiction over the company and local law would be "preempted and of no legal validity."

On Monday, Cal Am filed an application with the CPUC for a three-pronged water supply proposal that could cost up to $395 million. The proposal includes a company-owned desal plant north of Marina, expanded aquifer storage and recovery in collaboration with the Monterey Peninsula Water Management District, and water purchased from the Monterey Regional Water Pollution Control Agency's groundwater replenishment project. It would also include a Cal Am delivery pipeline.

The proposal is intended to replace the failed regional desal project, which crumbled amid conflict of interest allegations, financing difficulties and legal challenges.

Under a proposed timeline, the CPUC would review and approve the project by February, construction would begin by early 2015 and be finished by the end of 2016, when a state-ordered cutback in pumping from the Carmel River is set to take full effect.

Cal Am's plan calls for financing the project through low-cost state loans and a customer surcharge for about $99 million in initial costs that will boost water bills by about 30 percent this year and up to 60 percent by 2014.

Cal Am's projections say customers' water bills would be expected to double as a result of the water supply project, and could nearly triple by 2017 as a result of projects such as the removal of the San Clemente dam, the Sand City desal plant costs, and other work.

In an exclusive interview with The Herald, Cal Am president Rob MacLean said company officials realize the increase represents a "significant investment" for customers, but the urgency to meet the state order and avoid "devastating" water rationing makes it necessary.

MacLean said the company is doing what it can to keep project costs as low as possible, saying plans to slash its low-income payment plan and reduce its potential rate of return.

While Cal Am is asking for a 10,200-acre-feet-per year desal plant in its application, if the Pollution Control Agency's project is ready to produce about 3,500 acre-feet per year on time and on budget then Cal Am's plant would only need to produce about 5,500 acre-feet per year.

Either way, the cost for Cal Am customers is expected to be about the same because they would pay for the expense of the groundwater replenishment project through rate increases.

MacLean said the company's plan to seek low-cost state financing could save Cal Am's Peninsula customers about $3 million per year.

The proposal calls for drilling all slant wells on the shore north of Marina near the Cemex plant where the previous project's wells were to be located, which could help resolve water rights issues. The untreated water would then be sent to a desal plant planed for a 46-acre site now owned by Dole.

MacLean said neither site has been acquired, but talks are in process.

The desalinated water would then be sent to the Peninsula via a new Cal Am-owned pipeline, expected to cost about $82 million.

Since much of the project would be similar to its predecessor, MacLean said Cal Am hopes to rely on a supplemental environmental impact report. He said that since Cal Am would own the wells, the desal plant and the pipeline, the CPUC is the appropriate lead agency under the state's environmental quality act and a recent intended court decision from Judge Lydia Villareal in a suit filed by the Ag Land Trust would not apply.

MacLean pointed to a letter from CPUC general counsel Frank Lindh suggesting the county's public desal plant ownership rule wouldn't apply to Cal Am because it is regulated by the commission.

In the letter, Lindh points out that former acting County Counsel David Nawi wrote a 2003 memo coming to essentially the same conclusion.

MacLean said there's no guarantee any project would be able to avoid challenges and subsequent delays, but he believes the new proposal addresses several important issues. He said he also believes the CPUC understands the urgency of the looming cutback and could help make sure the project review stays on schedule.

At a public presentation of the project by MacLean during a Peninsula Water Authority meeting at Monterey City Hall, the council chambers were filled with people invested in the water issue, including members of the water management district, Peninsula cities and citizens' water advocacy groups.

Asked by Del Rey Oaks Mayor Jerry Edelen whether Cal Am would purchase water from another project if its own was rejected, McLean said the company would.

Monterey City Councilwoman Libby Downey and others questioned how Cal Am expects to avoid lawsuits as it pushes its project forward.

"The ratepayers need representation," said local water activist Ron Weitzman, questioning Cal Am's assertion that an average water bill amounts to about $38 a month. Given that the company collects $48 million in rates a year, the figure is more like $90 per customer, he said.

Weitzman added that Cal Am is investing in "an unreliable water supply" with its aquifer storage and recovery system, which could go dry if another dry winter occurs.

The public brought the water crisis on itself, said Nelson Vega of Monterey, by rejecting a new dam on the Carmel River.

Cal Am is not the enemy, he said, and "if you think they're making too much money, then buy their stock."

"The ideal," said Pacific Grove Councilman Rudy Fischer, "would be a public-private partnership" in developing a plant.

His city last week approved a resolution to pursue being the lead agency for Nader Agha's People's Water Project at Moss Landing, but Fischer said Pacific Grove doesn't want to go it alone. "The resolution we brought forward was not exclusive. We are inviting other agencies to work with us."

MacLean said discussions

continue with the company's former regional desal partners — the county and Marina Coast Water District — in an attempt to resolve issues involving the previous project including millions of dollars in unpaid bills. But he said there has been no resolution yet.